Alternative Dispute Resolution in Texas -
Litigation and appeals involving issues in mediation, arbitration, and other means of nonjudicial conflict resolution and settlement.

Monday, November 12, 2007

Houston Court orders arbitration under FAA in commercial dispute

Context: Residential construction / remodeling / contractorsIn per curiam opinion Fourteenth Court of Appeals grants mandamus relief to set aside Houston county judge's order denying arbitration sought by defendant in dispute involving commerce.Court says that subject matter of dispute was covered by Federal Arbitration Act (FAA) and that appellate complaint against trial court judge was properly brought by petition for mandamus.In Re Studio 8 Floors & Walls, Inc., No. 14-07-00764-CV (Tex.App.- Houston [14th Dist.] Nov. 8, 2007)(arbitration mandamus)
Appeal from County Civil Court at Law No 4 of Harris County (Hon. Roberta Lloyd)
Relator's counsel: Kristopher K. Ahn
Respondent's attorneys: Kenneth Paul McDaniel, Nathan Desai
ORIGINAL PROCEEDING WRIT OF MANDAMUS
M E M O R A N D U M O P I N I O N
In this original proceeding, relator asks this Court to compel the Honorable Roberta A. Lloyd, presiding judge of Harris County Civil Court at Law No. 4 to (1) vacate the August 8, 2007, order denying relator's motion to compel arbitration in trial court cause number 888,319 styled Dolores Mora v. Studio 8 Floors & Walls, Inc.; and (2) enter an order granting the motion and compelling arbitration.
Relator claims the trial court abused its discretion by denying relator's motion and there is no adequate remedy by appeal. We conditionally grant the writ.
Mandamus relief is available if the trial court abuses its discretion, either in resolving factual issues or in determining legal principles when there is no other adequate remedy by law. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992). A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law, or if it clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005).
The underlying suit is for breach of a contract to install floor and wall tile in the real party plaintiff's kitchen. The contract at issue contains the following statement:
Should there be any disputes between the parties, client agrees on arbitration as a means to resolve the conflict and will NOT resort to lawsuit for resolution.
Relator moved to compel arbitration under the Federal Arbitration Act. The trial court denied the motion, and relator filed this proceeding. On September 21, 2007, we ordered all proceedings in the underlying action stayed pending our decision on relator's petition.
Relief from a denial of arbitration sought under the Federal Arbitration Act must be pursued by mandamus. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 91 (Tex. 1996). "Mandamus is proper to correct a clear abuse of discretion when there is no adequate remedy by appeal, as when a party is erroneously denied its contracted‑for arbitration rights under the FAA." In re D. Wilson Constr. Co., 196 S.W.3d 774, 780 (Tex. 2006).
A trial court has no discretion in determining what the law is or applying the law to the facts. Walker, 827 S.W.2d at 840.
Federal and state law strongly favor arbitration. Jack B. Anglin v. Tipps, 842 S.W.2d 266, 268 (Tex. 1992). A presumption exists in favor of agreements to arbitrate under the FAA, and courts must resolve any doubts about these agreements in favor of arbitration. Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996).
A party seeking to compel arbitration by a writ of mandamus must (1) establish the existence of a valid agreement to arbitrate under the FAA, and (2) show that the claims in dispute are within the scope of the agreement. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005). "Whether a valid arbitration agreement exists is a legal question subject to de novo review." D. Wilson Constr. Co., 196 S.W.3d at 781.
Under the FAA, absent unmistakable evidence that the parties intended the contrary, it is the courts rather than arbitrators that must decide "gateway matters" such as whether a valid arbitration agreement exists. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005). Claims must be brought on the contract (and arbitrated) if liability arises solely from the contract or must be determined by reference to it. Id. at 132.
Although an arbitration agreement does not have to assume any particular form, the language of the agreement must clearly indicate the intent to arbitrate. See Massey v. Galvan, 822 S.W.2d 309, 316 (Tex. App.-Houston [14th Dist.] 1992, writ denied). The language in the arbitration agreement at issue is clear, and the contract was signed by the real party. The suit is for breach of contract; therefore, the claims in dispute are clearly within the scope of the agreement.
The FAA applies to all suits in state or federal court when the dispute concerns a A"ontract evidencing a transaction involving commerce." Jack B. Anglin Co., 842 S.W.2d at 269‑70. The FAA does not require a substantial effect on interstate commerce; it only requires that commerce be involved or affected. In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127 (Tex. 1999) (orig. proceeding) (contract for renovation work on Houston apartments to be done by Texas business for Georgia owners involved interstate commerce). Activities than can serve as interstate commerce include transportation of materials across state lines or manufacture of parts in a different state. In re Big 8 Food Stores, Ltd., 166 S.W.3d 869, 879 (Tex. App.-El Paso 2005, orig. proceeding). Purchasing goods and services from outside Texas that are shipped to Texas establishes that a party is engaged in interstate commerce. In re Border Steel, Inc., 229 S.W.3d 825, 830-31 (Tex. App.-El Paso 2007, orig. proceeding).
Relator furnished an affidavit from Linda Chou, the owner of Studio 8 Floors & Walls, to the court below. She averred, in part, that "Studio 8 is a small business based in Texas. Studio 8 use[d] tile and materials from China, Italy, and other locations outside of Texas in performing its contract with Plaintiff. Studio 8 also used other materials such as grout and tools purchased at interstate companies such as Home Depot and Lowes in performing its contract with Plaintiff." Thus, the contract involves commerce.
We conclude that relator established the existence of a valid agreement to arbitrate under the FAA and the claims in dispute are within the scope of the agreement. Therefore, the trial court abused its discretion in denying relator's motion to compel arbitration.
Accordingly, we conditionally grant the petition for a writ of mandamus and direct the trial court to vacate its August 8, 2007, order denying relator's motion to compel arbitration and enter an order compelling arbitration. The writ will issue only if the trial court fails to act in accordance with this opinion.
PER CURIAM
Petition Conditionally Granted and Memorandum Opinion filed November 8, 2007.
Panel consists of Chief Justice Hedges and Justices Anderson and Seymore.